The Euro/dollar rate has closed up for the 4th day in a row. Speculation over the possibility of Donald Trump getting impeached helped the single currency strengthen to 1.1172. Escalating political tensions in the US have induced a slide in bond yields as well as a mass retreat towards safe haven assets. Investors are currently buying gold, Japanese yen and US bonds.
Gold has appreciated by 25 USD to 1,261 USD per Troy ounce. The USD/JPY exchange rate has fallen by 229 pips to 110.78. US 10Y bond yields have fallen by 2.69% to 2.236%. The probability of interest rates going up in June has fallen to 64.6%.
First, it was revealed that Trump had shared some top-secret information with Russian foreign minister Sergey Lavrov about the Islamic State terrorist organisation. Then, he allegedly asked the former FBI chief James Comey to halt the investigation into former national security advisor Michael Flynn’s relations. On Wednesday, Al Green, a congressman from Texas, called for Trump’s immediate impeachment. He believes that Trump has obstructed the investigation into the presidential campaign and Russian influence on the 2016 election.
Because of these troubles, investors fear that the Trump administration will have some difficulties trying to implement its tax and healthcare reforms.
No president has ever been successfully impeached in the history of the USA. In any case, the Republican party won’t allow it to happen this time around given that they control both houses of Congress. The Euro’s rally won’t last much longer given that there is no fundamental driving force behind it.
The economic calendar is sparse today. There are no important statistics for currency markets to be released. News outlets will continue to control the market with their horror stories. In the Asian session, the Euro has slid from a high of 1.1172 to 1.1143. It looks like profit taking, but it’s too early to draw conclusions. Yesterday had a similar situation when the Euro dropped from 1.1093 by 38 pips. If we take that value from 1.1172, we get 1.1134. In order to get buyers to close their long positions, sellers need to push the price below 1.1125.